Key messages
- As demand for renewable energy technologies rises there are growing concerns about trade dynamics and value chain-related challenges for energy transition minerals (ETMs).
- The ETM value chain has significant environmental, social and economic impacts, which are felt hardest in the Global South.
- Addressing the governance gaps within the ETM value chain is a major challenge for a just energy transition that avoids greater burdens and fewer benefits for Global South countries.
The demand for ETMs – minerals and metals essential for clean energy technologies such as cobalt, copper, lithium and rare earth elements – has risen sharply due to the global push for low-carbon development and energy security. While specific mineral criticality varies by country based on domestic reserves, supply chain risks, supply predictability, prices and national security needs, ETMs are essential worldwide for renewable energy systems, including batteries, solar panels and wind turbines.
Forecasts show a major gap between future mineral needs and current known reserves. By 2050, annual lithium demand could exceed 25% of known reserves and be 12 times current production levels. Cobalt demand might range from 6,000 to 3.6 million tonnes per year against global reserves of 8.3 million tonnes. Similarly, rare earth element consumption is expected to quintuple by 2030 compared to 2005, potentially surpassing global known reserves by 2050. The extraction, processing and disposal of these minerals can also generate enormous amounts of waste – by 2050, the extraction of copper, nickel, manganese, and lithium alone could produce 953 gigatonnes of dry waste over the 2020–2050 period. As mineral demand surges, understanding the ETM value chain – spanning extraction, processing, and distribution – is essential to managing the global distribution of benefits and environmental and social burdens (Figure 9).
As the demand for ETMs increases, new geopolitical dynamics emerge, with governments taking strategic actions such as imposing mineral import bans, forming alliances to secure supply chains, increasing domestic mining operations, and strengthening domestic processing. Expanding mining operations into ecologically vulnerable areas may create further risks, while a mineral-intensive energy transition could still lead to supply shortages. Balancing national priorities with international collaboration is essential to prevent delays in the global energy transition.
A responsible ETM value chain must go beyond economic and technological factors, needing to prioritise environmental protection, social justice, benefit sharing and fairtrade principles (Figure 9). The concept of a “just energy transition” incorporates labour rights, governance, and socio-political dimensions, ensuring that the transition to clean energy does not exacerbate inequalities or harm vulnerable communities. Emerging frameworks like planetary just transitions, which integrate decolonial perspectives, offer a broader approach to addressing the complex challenges of ETM value chains.
Resource-rich countries in the Global South often bear the brunt of these impacts while benefiting less from the energy transition. A critical challenge in governing ETM value chains lies in the Global North’s dominance over high-value-added production and consumption, despite the Global South’s resource wealth. Disparities in trade policies, technological capacity, and economic diversification hinder the Global South’s ability to fully benefit from the energy transition. Stockpiling by Global North countries exacerbates supply constraints and price inflation, exacerbating inequities. For example, while cobalt mining is concentrated in the DRC, DRC-owned companies control less than 5% of production. The search for new mineral sources could also harm local communities and engender opposition. A recent study found that 69% of over 5,000 global ETM projects are located on or near land classified as Indigenous people’s or peasant land. Their overlap with protected areas, biodiverse regions, and Indigenous lands contributes to biodiversity loss, land degradation, water scarcity, and pollution.
Ensuring a responsible ETM value chain requires concerted efforts to minimise environmental impacts, uphold labour standards and fair terms of trade, and foster multi-stakeholder participation throughout the value chain. Current voluntary standards and regulations, such as the International Council on Mining and Metals (ICMM), Extractive Industries Transparency Initiative (EITI), and EU directives on corporate sustainability, aim to improve transparency and due diligence throughout the value chain. However, these mechanisms are often uncoordinated and insufficient, while comprehensive governance mechanisms that balance geopolitical interests, harmonise trade, planetary justice and climate policies, and involve civil society remain limited. The United Nations has called for improved, coordinated action through a working group on Transforming Extractive Industries for Sustainable Development and a Panel on Critical Energy Transition Minerals to establish common principles.
Governance mechanisms across the ETM value chain must be people-centred and planetary justice-centred, proactively addressing environmental, social, economic, and technological risks throughout the entire value chain. International cooperation and circular economy principles must counter the trend of national interest policies at the expense of a just and equitable global energy transition. Ethical sourcing, transparency, and traceability from extraction to end use are critical to ensuring that the benefits of the energy transition are shared equitably across the globe.
Guiding principles on Critical Energy Transition Minerals
The UN Secretary-General’s Panel on Critical Energy Transition Minerals has put forward seven voluntary guiding principles, drawing upon established norms, commitments, and legal obligations outlined in UN documents:
- Principle 1 – Human rights must be at the core of all mineral value chains.
- Principle 2 – The integrity of the planet, its environment and biodiversity must be safeguarded.
- Principle 3 – Justice and equity must underpin mineral value chains.
- Principle 4 – Development must be fostered through benefit sharing, value addition and economic diversification.
- Principle 5 – Investments, finance and trade must be responsible and fair.
- Principle 6 – Transparency, accountability and anti-corruption measures are necessary to ensure good governance.
- Principle 7 – Multilateral and international cooperation must underpin global action and promote peace and security.
Policy implications
- The announcement at COP28 of the UN Panel on Critical Energy Transition Minerals is a clear sign of the importance of this issue, and the recognition that governance gaps must be addressed to ensure that the extraction and processing of critical minerals underpinning the global transition to clean energy is done in a “sustainable, fair and just way”. The Panel’s recently published report offers a set of principles and recommendations to member states and other stakeholders ahead of COP29, and is expected to play a crucial role in shaping the global approach for the governance of energy transition minerals (ETM).
- Developing consistent and enforceable standards across the ETM value chain will require a concerted effort of international cooperation. The OECD’s Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas has operated as the de facto international standard, and has been incorporated into regulations in Europe, the United States, Central Africa, and the Middle East, as well as in market and exchange requirements in Europe and Asia.
- Going beyond the development of industry standards and voluntary frameworks, an essential step for responsible ETM value chains is the harmonisation of regulations and development of binding agreements that prevent regulatory arbitrage. A significant development in this regard is the EU Critical Raw Materials Act that recently came into force. The Act makes an emphasis on sustainable sourcing, recycling and the circular economy.
- The global governance architecture of ETMs should enable resource-rich countries in the Global South to benefit equitably from the global energy transition, within a planetary justice framework.
- Governments can ensure that local communities are actively involved in decision-making processes, leading to more transparent and accountable governance of ETM resources. For example, “free, prior, and informed consent” is a common requirement for human rights protections.
- Specific financial incentives for research, development and deployment of innovative materials and processes throughout the ETM value chain (e.g., non-toxic extraction methods and mineral recycling technologies) in the form of tax exemptions, subsidies or grants are also important.
The ETM value chain and the challenges different stages present across environmental, social, economic and technological domains.
